Poor old Henry Paulson. It's been a tough month to be in charge of the American economy. But after a series of screeching U-turns, he isn't exactly inspiring confidence among the country's big-brained financiers.

Paulson's bald head and uncompromising manner have gained him the nickname Hammer. Since his appointment two years ago, he has seemed like a breath of pragmatism in the ideologically evangelical Bush administration.

But the pugnacious former school football star has struggled to stay on top of the fast-moving credit crunch. Who would have thought the swashbuckling one-time Goldman Sachs chief would be suffering unfavourable comparisons with the dour Scottish solicitor running Britain's Treasury, Alistair Darling?

Paulson's approach has been inconsistent, confused and reactive. In March, he organised a bail-out of Bear Stearns on the grounds that the failure of a major investment bank would have a "systemic" impact, with implications reverberating around the financial system. But he felt differently about Lehman Brothers, allowing it to go bankrupt last month.

Stung by a subsequent plunge in the stockmarket, Paulson hurriedly went back into intervention mode by rescuing the insurer AIG. Days later, the authorities cajoled JP Morgan to step in when Washington Mutual collapsed.

There's no real logic in that chain of events. The Federal Reserve chairman, Ben Bernanke, this week offered a rather confusing explanation of the decision to allow Lehman to collapse.

"A public-sector solution for Lehman proved infeasible, as the firm could not post sufficient collateral to provide reasonable assurance that a loan from the Federal Reserve would be repaid," said Bernanke. "And the treasury did not have the authority to absorb billions of dollars of expected losses to facilitate Lehman's acquisition by another firm."

That doesn't make much sense. The Fed has been willing to buy debt on the commercial paper market without solid collateral. And the authorities have opted to give unlimited guarantees on liabilities to secure takeovers of Bear Stearns and Wachovia.

The debacle of America's banking bail-out has been another saga of jangled nerves and sweaty palms. Paulson started out with a $700bn plan to buy banks' distressed debts — a proposal which went down like a glass of sour milk on Capitol Hill. Paulson was adamantly opposed to a more radical approach of purchasing stakes in leading banks, citing negative precedents in Japan.

"The right way to do this is not going around and using guarantees or injecting capital, but to use market mechanisms," he told the Senate banking committee. It took weeks to get politicians to agree to this. But after all the political battling, it quickly became clear that the plan wasn't sufficient.

This week, Paulson changed his mind by copying Britain with a $250bn fund to buy stakes in leading banks. As befits a Goldman Sachs alumni, he hasn't attached very stringent conditions. There is some mealy-mouthed language about forbidding executive bonuses that encourage "excessive" risk, and banks aren't allowed to raise their dividends (although they can maintain them at present levels).

Quite how we got into this muddle is a mystery. Why didn't Paulson opt for stake purchases in the first place? It is tempting to conclude that he was deterred by the administration's ideological wariness of public ownership. Irrespective of motive, it was a serious error which contributed to a slow-motion stockmarket crash.

In the New York Times the Nobel prize winning economist Paul Krugman has been scathing: "What, exactly, in the experience of the past year and a half — a period during which Mr Paulson repeatedly declared the financial crisis 'contained' and then offered a series of unsuccessful fixes — justifies the belief that he knows what he's doing?"

It wasn't that long ago that Paulson was being lauded in affectionate terms. Barrons analysed his choice of mobile phone (a Motorola Razr) under the headline "Saving the world on an ageing cellphone".

In August, there were even suggestions that Paulson might stay on to work his ministerial magic under the next president, whether it be Barack Obama or John McCain. I think we can now safely declare that possibility to be dead.

Paulson has worked day and night to try to save the economy. At times, the 62-year-old has looked pale and drawn, and his voice has been hoarse. According to the Washington Post, he suffered a dizzy spell at one point and had to be supported by New York's Democratic senator, Chuck Schumer.

In three months' time, a new president will be inaugurated and Paulson will almost certainly be heading for retirement. When he leaves office, he can comfort himself with the proceeds of his Goldman Sachs shares, which he sold in 2006 for almost $700m. It's a good job he offloaded the stock on entering the government. The bank's share price has fallen by 27% under his stewardship of the US economy.